Justice Dept. sues H&R Block to stop from buying TaxACT
The U.S. Justice Department filed a civil antitrust lawsuit Monday to prevent H&R Block from acquiring 2SS Holdings Inc., the developer of the TaxACT digital tax preparation business. The Justice Department believes the strategic acquisition would hurt competition and rightfully so. It’s a good thing this H&R Block lawsuit didn’t happen during the middle of tax season as this is not the type of publicity you’d want for your business.
According to the department, the proposed purchase would “combine the second- and third-largest providers in that market and essentially create a duopoly.” Analysts believe the deal would lead to millions of taxpayers to pay higher taxes for do-it-yourself tax prep products.
The acquisition was supposed to happen last October in a deal worth $287.5 million and H&R Block was hoping the deal would have increased its earnings per share by 5 cents. The Justice Department’s antitrust division had to step in because the deal would lead to higher prices, while also deterring innovation and reducing product quality for those who do their own taxes.
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The Justice Department has accused H&R Block of publicizing that the deal would eliminate a competitor and helps regain control of the industry’s pricing standards.
"TaxACT has aggressively competed in the digital do-it-yourself tax preparation market with innovations such as free federal filing," said Christine Varney, assistant attorney general for the Justice Department's antitrust division.
"If this merger is allowed to proceed, that type of innovation will be lost," she said in a statement.
H&R Block shares were down 45 cents to $15.88 this morning in trading on the NYSE.